International Monetary Fund (IMF) predicts India’s (GDP) growth to over 8% post adoption of GST

The adoption of the Goods and Service Tax (GST) could help raise India’s medium-term gross domestics product (GDP) growth to over 8% and create a single national market for enhancing the efficiency of the movement of goods and services according to the International Monetary Fund (IMF).

The IMF said larger than expected gains from the GST and further structural reforms could lead to significantly stronger growth, while a sustained period of continued low global energy prices would also be beneficial to India.

Noting that India’s tax revenue-to-GDP ratio (at around 17.5 %) remains considerably below than its emerging market peers, the IMF said the implementation of a robust GST should be a key priority given its growth-enhancing effects.

According to the IMF report, Indian authorities were confident that the outstanding issues related to GST implementation could be settled promptly.

The GST replaces a plethora of cascading center, state, interstate and local taxes with a single, nationwide, value-added tax on goods and services. IMF said the destination-based GST will create, for the first time, a single Indian market, and will greatly enhance India as an investment destination.

By subsuming most of the existing indirect taxes, such as excise, sales and services levies, the indirect tax structure of the country will become less complex and the cost of doing business will decline. The Indian government expects to roll out GST by 1 July after it could not meet the 1 April 2016, target.